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Weekend Report...The Buck Stops Here 2 !

By: Rambus Chartology | Thursday, November 29, 2012

About a month or so ago I wrote the Weekend
Report on the US Dollar showing many dollar charts that were suggesting
the dollar was close to topping out. Its important to pay close attention
to the dollar as it affects so many markets especially Gold and Silver.
I would like to update a few of the charts to see how the price action
has been.

First lets look at the Fibonacci retracements and see which one finally held
resistance. The chart below shows the 50% retrace held which also corresponded
to the top of the brown shaded support and resistance zone. Fridays price action
also closed below the 200 dma and MACD at the bottom of the chart has now crossed
giving a sell signal.

Next lets look at the H&S that was forming that has two left shoulders.
It looks like the dollar has just completed the first right shoulder and is
headed back down to the neckline. As you know symmetry plays a big role in
how I look at the charts. As you can see on the chart below the left side of
the H&S top has two shoulders. Its very possible that the dollar may build
a second right shoulder before the H&S top is complete. Its possible that
this H&S top could be of an unbalanced variety meaning two left shoulders
and one right shoulder. We will just have to see what happens when the dollar
reaches the neckline and take it from there. Note the MACD has crossed and
is now giving a sell signal as well.

Lets take a look at the ROC indicator that was approaching the zero line,
red circle on chart below. Its currently at a minus 1.25 which is still in
negative territory. The 10 wma has turned up ever so slightly but with last
weeks price action in the dollar there is a good chance it will start to roll
over again. From this ROC indicator I still rate the dollar as on a sell signal.

Lets now take a peek at the Euro as it should have an inverse look to the
US Dollar. The daily chart below shows a nice inverse H&S bottom forming
that has a price objective up to 145 or so as a minimum move. Note the MACD
indicator at the bottom of the chart has now crossed and is giving a buy signal.

I used a slightly different approach looking for the bottom for the XEU (The
Euro ETF). Notice the big green circle on the left side of the chart and how
the little red bull flag formed right on top of the black dashed horizontal
rail that acted as support. Now focus your attention to the right side of the
chart and the big green circle that is showing the same setup. After testing
the black dashed horizontal rail as support the euro began to liftoff last
Friday. That bottom is also the bottom for the right shoulder I showed you
on the chart above.

Lets see how gold looks from several different currencies. The chart below
is a combo chart that shows how gold is trading against the US dollar and several
of the major currencies of the world. As you can see gold has broken out of
the red triangles and is in the process of doing some backtesting in some cases.
The Yen to gold looks particularly strong in here as it will probably be the
first currency to reach new all time highs with the euro right behind.

Lets look at one more combo chart that shows the US dollar on top and Gold
on the bottom. This chart shows the inverse relationship between the two, purple
vertical line. The most important thing to take away from this chart below
is the neckline on the dollar and the top blue rail of the rectangle for gold.
Those are both strong and hot rails. By the looks of it they will both hit
their respective rails at the same time, the dollar the neckline and gold the
top blue rail of it's rectangle. That is what you can call an inflection point.
I suspect they will both work through the breaking out and backtesting process
together for their critical trendlines. Once the breakout and backtests are
complete each trendline will reverse its role. The neckline once broken to
the downside will act as resistance and the top blue rail of the rectangle
will act as support when it finally gives way.

Lets look at one last chart that is the gold to silver ratio chart. When the
price action is falling silver is outperforming gold. In a strong move in the
precious metals I like to see silver outperforming gold. A break below the
bottom rail of the blue rectangle will signal silver is the place to be for
investments purpose. This would also be bullish for the stock markets.

OK, one last chart of the gold to silver ratio that shows when silver is outperforming
gold it's good for the stock markets. Thats because its still looked at as
a commodity. A strong stock market equals more demand for silver so the two
go hand in hand. The SPX is above and the gold to silver ratio is on the bottom.
As long as the black arrows point up for the SPX and down for the gold to silver
ratio that should be a bullish setup especially for silver.

I've been working on a long term gold chart that will show you
how beautiful this bull market has been. I still have a little more work to
do but It should be finished for the Wednesday Report. So stay tuned as it
will be one of a kind chart that you won't find anywhere else on the net....All
the best...Rambus

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